Asian Indices Correlation

I made a little research about the correlation between Asian Indices. That is including Japan (NIKKEI), South Korea (KOSPI), Malaysia (KLCI), Taiwan (TAIEX), Singapore (STI), and Indonesia (JCI). I also try to look these indices’ correlation with Dow Jones Index (DJI). From the result, Japan has the strongest correlation with DJI (94.9%) and Indonesia has the least correlation with DJI (74.9%).

Asian Correlation

*Data Source: Yahoo! Finance Jan 2008 – Dec 2009

From the table, we could see if the regional indices are really high correlate with each other. And for Indonesia case, it has the strongest correlation with Malaysian Index followed by South Korea and Singapore.

Investing in Bond

Here are some guidances I’ve got during a training a while ago. This guidance is more to look the outlook of bond market.

1. The economic growth projection
The positive growth on an economy gives a sign of good investment opportunity. Hence a good economic growth would lead an attractive investment. For Indonesia case, its large population could benefit the economic growth. Since the driver for Indonesia growth is from consumption. Thus a large population means a large consumption potential. But there’s one thing to be cautious: how sustain is the growth?

2. Interest rate and inflation
A low inflation made the interest rate tend to be low. If that’s the situation then stock market is more attractive, and vice versa.

Riil interest rate = Nominal interest rate – Inflation

The riil interest rate is usually 1 – 3%.
If the inflation is predicted to be around 5% +/- 1%, then the nominal interest rate would be 8% (6% + 2%).
Thus the bond yield should be above the nominal interest rate.